$20,900,000 Acquisition Financing for a Historical Hollywood Mixed Use Property

Transaction Description: George Smith Partners successfully sourced the acquisition/bridge financing for a 163 unit Historical Hollywood Apartment building with 10,500 square feet of ground floor retail. Despite recently completed remodeling, our Sponsor felt further upgrades would benefit the Net Cash Flow. Financing was sized to 80% of the total capitalization consisting of the $25,250,000 purchase price and $815,000 of capital upgrades. Priced at 30 day LIBOR + 435, the non-recourse loan carriers a 3 year term with two 12-month extension options.

Challenge: Of the 163 units, 105 (64%) are sub-350 square foot efficiency units. Many tenants are still receiving rent concessions from leases signed at the end of 2013 when the property was vacant. Two of the larger retail tenants were still in abatement and owed money for tenant improvements. Recently rehabilitated in 2013, multiple capital providers were not convinced that further capital upgrades would generate additional rent growth.

Solution: GSP completed a thorough market evaluation to confirm a high historical occupancy and volume for efficiency units. Market demand for this floorplan is supported with the lifestyle of this market clientele. This market evaluation also confirmed that the Hollywood rental market will not require the Sponsor to offer concessions upon unit turn; therefore, remaining concessions were not underwritten. Professional third-party management was also engaged to alleviate future lease-up concerns for both residential and commercial units. A current lease-comp survey supports the capital upgrade business plan and potential rent growth for the efficiency units.